Tim’s World: Millionaire Mentor Update

Local Government Officials and the Ministry of Crab

It’s been another crazy week! All made possible by learning to trade penny stocks. Now I’m on a mission to teach others, build schools, support charities, and experience the world.

Does your ticket to the table start with the Trading Challenge? One way to find out.

As you know, I was in Thailand for several days. I went to Bangkok and visited a new Karmagawa school. And I ate at some awesome restaurants with a bunch of friends.

Then I went to Sri Lanka, where I met with several local government officials. We discussed how Karmagawa will approach charity there. It takes a while to plan these things and we need to decide whether it’s best to build a school or an orphanage.

This is my most important work and I’m excited by what we’re doing. Even though it’s only my second time visiting Sri Lanka, I’m really proud to begin supporting several great charities.

I also had the chance to try out some of the best restaurants in Asia with The Hungry Tourist crew. What an amazing group of people — I’m SO grateful for the unique experience. Check out the amazing food …

I highly recommend Sri Lanka and Thailand — I’ve fallen in love with the people, the food, and the culture in both countries. One of my favorite meals of the whole trip was at the Ministry of Crab in Colombo, Sri Lanka.

Ministry of Crab was voted number 25 on the top 50 restaurants in Asia. This place is amazing — they serve only the freshest seafood. They don’t believe in using a freezer and if the weather gods don’t offer up the size of crab you want, it’s simply not available that day. The crab menu goes from ½ kg (small) all the way up to Crabzilla! The food was incredible.

Meanwhile, even while I’m traveling, working with charities, eating, and whatever else — I’m still trading.

Trades of the Week: Trading While Dining

I didn’t have any truly great trades last week. I’m doing a lot of small trades right now because I’m scared of the overall market. Also, remember I’m trading here in Asia in the middle of the night and I don’t always have access to the best wifi.

The lesson here is to recognize your environment. I’m gonna give you some thoughts about three trades this week because it was fun and my foodie friends were laughing at me.

Each of these three trades was over the course of dinner with my friends. The first two, Alternet Systems, Inc (OTCPK: ALYI) and nFusz, Inc (OTCQB: FUSZ) were during one dinner. On ALYI, I made $470 and FUSZ it was $458 — so over $900 at dinner.** Then there was Leafbuyer Technologies (OTCQB: LBUY) where I made another $608.**

That’s $1,536 in profit over the course of two dinners.** Everyone at the table was laughing because I was trading. But I made more than the bill for everybody’s meals so …

… it was good.

LBUY was my best trade — a quick little morning spike. Even though I made $608** I really underestimated it. It was day one of an earnings spike. Earnings winners haven’t been that reliable lately, but LBUY actually spiked again the next day as you can see on the chart below.

It’s pretty crazy how day two of an earnings winner can be stronger than day one when the news is right there. Leafbuyer announced a 68% year-on-year rise in sales for the last quarter of 2018. They announced on January 31 — the day I traded the stock.  I took my profits nice and safe but underestimated it by 30%!

Check out the LBUY chart below:

LBUY: 2-day chart, 2-minute candles; earnings winner spike.

Notice the day one spike on the left side of the chart. Then the stock hit some historical resistance around the $.90 level. The second day of the earnings spike, which I totally missed, was much bigger than the first day.

Let’s take a quick look at the other two trades. The first is FUSZ — an intraday dip-buy into a panic. Notice the midday panic and bounce? This is a former supernova crashing hard after a puff piece press release about how they’d joined Microsoft’s Partner Network.

Here’s the FUSZ chart:

FUSZ stock chart
FUSZ: 1-day chart, 1-minute candlestick; midday panic and bounce

The last trade from the dinner table was ALYI. Again, this was an intra-day dip-buy into a panic. My goal was to sell into a 10-20% bounce, which is tough since it’s such a low-priced stock. But the pattern was right even though this trade happened fast.

ALYI stock chart
ALYI: 1-day chart, 1-minute candlestick; another multi-day runner panicking midday.

I’m really comfortable with the morning panic pattern. While these two were midday, they played out the way I expected. Nothing huge, but singles add up over time.

The takeaway from these trades: You can trade from anywhere — even the dinner table — and you should wait for your patterns. Don’t force it.

The Top 3 Patterns My Students Shared on Twitter

My students are all over the place right now. Some people are short selling these crazy spikes. Some like dip-buying. Some like breakouts…

Which brings me to my main point here: I don’t discriminate. I don’t recommend one ‘perfect’ pattern or trade.

You have to find what pattern works for you.

The main 3 patterns I’m seeing from my students are:

  1. Multi-day/multi-week breakouts with a catalyst — like LBUY above.
  2. Dip-buys into intra-day panics — like ALYI above, where it had a nice little 30% intraday dip and then bounced back to near its highs.
  3. Short selling spikes.

These kinds of plays are all about taking advantage of little glitches in low-priced stocks. Remember, this is small money. Wall Street doesn’t care about a few hundred dollars (or a few thousand dollars if I or my students took bigger positions).

But that’s nice — it’s what I’ve been doing my entire career.

Question of the Week

This one from a student following my trades over on Profitly:

“You recently traded SHMP for a $586 profit.** The chart looks like you could have played this two ways — as a morning gap up or a dip-buy. What made you play it the way you did?”

I love it when my students study hard! This was a trade where I took an overnight position on January 28. Let’s take a look at the chart and then I’ll share my thoughts. Actually, let’s take a look at two charts for Natural Shrimp, Inc. (OTCQB: SHMP) — a 1-year chart and then a chart for the days I traded.

Check out the 1-year chart with the first green day candle off to the right.

SHMP stock chart
SHMP: 1-year chart, daily candles. First solid green day on multi-month breakout

That’s a solid first green day breaking through resistance that’s been around for several months. This is the first hint about why I played it the way I did.

Now look at the chart showing my overnight position:

SHMP overnight stock chart

This chart shows the beautiful gap up after a positive press release. I love strong first green days on OTC runners!

So the question asked if it could have been played as a dip buy after the morning sell-off? The answer is maybe. I played the first green day pattern with a goal of making 7–15% into a gap up or morning spike.

My experience with first green days with a catalyst is that they can run again or gap up. I went with my experience. What if the gap up or spike didn’t happen? I would have followed my most important trading rule — Rule #1: Cut losses quickly.

There’s another factor at play here. I’m trading my small account so I have to consider the pattern day trader (PDT) rule. Overnight positions don’t count as one of the limited number of weekly trades following the PDT.

I really prefer dip-buys. Morning spikes? I was dead on with the LBUY trade above — but because it’s not my true gimme pattern or bread-and-butter pattern, I was more conservative with it. I can be more aggressive when I’m comfortable with a pattern.

I think there are some good lessons here based on this trade and on the question:

  • Focus on a pattern and get really good at it. Once you’re good at it, then you can take bigger positions.
  • Get more aggressive when you have more experience and know the pattern inside and out.
  • Don’t mind taking speculative trades, but don’t be aggressive on something where you don’t have a lot of success. And follow Rule #1: Cut losses quickly.

A lot of people ask me “How do you get confident?”

Well, you do the trade over and over and over again. You win more than you lose and …\

… you gain confidence.

It’s those kinds of patterns — the kind where you’ve gained experience and confidence — that will become among your closest trading allies. So start learning them now.

– Tim

P.S. Why haven’t you applied for the Trading Challenge yet? Get on it!

That’s another Millionaire Mentor Update wrap! Are you a trader? Let me and your fellow readers know how you’re applying the lessons in the weekly updates. New to trading? What have you learned today that you can apply in the future? Comment below!